Altcoins Break Out, Is This The Start?

Altcoins Break Out, Is This The Start?

Written by: Michaël van de Poppe

The markets have been waiting for a reversal on the altcoins, as we've been experiencing some downwards momentum overall for the entire year. We're in search of some momentum and altcoins that are making movements, as that's just simply easier to trade.

Let's have a look at the Bitcoin dominance, which is currently doing fine, as it's copypasting the movements from the previous cycle.

The chart speaks for itself. It shows that we're eight-ten months prior of the Bitcoin halving and are, again, rejecting from the 200-EMA in order to have strength to be starting to fire up on the altcoins. In previous cycles, the exact same price movement occurred, through which we can see that cycles do repeat itself and that sentiment is also a copy/paste of the previous cycles.

In that regard, in 2015, during this period, it was the kickstarter of the entire bull cycle of Ethereum. In 2019, we've seen the start of DeFi summer taking place through 2020. I'm wondering what the topic will be this cycle, but the conclusion can be made that we're anticipating a potential strong breakout on altcoins in the upcoming period, especially if Bitcoin doesn't lose a very important level of support.

I've mentioned this quite often, but Bitcoin needs to sustain above the 200-Week EMA. It seems very likely that we'll be having a case of the final correction to be occurring here, which is inevitably skewed towards the 200-Week EMA.

That needs to hold for support in order to prevent a further downwards crash, but even if we have that crash and sentiment is going to make a turnaround, would you be buying? I think you should. Most people don't feel like they want to buy when the markets are insecure, but as a matter of fact, you should actually consider of buying your assets in this period and just simply hold for the coming two years.

Once we're starting to look at altcoins, we can derive certain categories of strength. First of all, we've got the majors, which are still chopping around and not showing much of strength, as of yet. Then, we've got altcoins which are breaking out massively and we've got a group of coins which are still continuing the downwards momentum and are probably going to die down.

First, we'll have a slight look at the majors. In this case we'll have a chart of Chainlink against Bitcoin, which shows that there's a strong S/R flip taking place on the higher timeframes for this pair.

This pair might have seen a deviation beneath the low in June/July (very comparable to the price action we've witnessed on the USDT pair beneath $5). In that regard, this support/resistance flip is a key ingredient for further upwards continuation on this BTC pair and therefore we can assume we'll be having continuation on the USDT pair as well.

However, if you go onto social media, probably you won't be finding any arguments of people who are going to show to you that it's the best period to buy altcoins. As a matter of fact, majority of the traders and investors in the markets are actually looking at continuation of the downwards trend, as September is quite often a terrible period.

Another cryptocurrency which has been moving substantially is Fetch.AI. This one has seen some tremendous strength at the beginning of the year and was one of the massive winners, through which it seems likely that we'll continue that again and have another run on FET.

The higher timeframe chart for Fetch.AI shows that we're making higher lows and higher highs. The price of FET took out the highs of June and July, through which you'd want to be looking for a continuation play in this upwards trend.

Then, navigating towards the lower timeframes is essential (after establishing must-hold levels on the higher timeframes). In this case, we can define some optimal entry points, which we can see on the charts as a crucial one to sustain on. It's the area between $0.20-0.023. If those hold as support, we'll be likely seeing a continuation play taking place on Fetch towards the next Fibonacci level.

That would mean that we'll be seeing strength towards the regions of $0.32 on Fetch.

However, some altcoins have been breaking out significantly, like PERP.

If you're more into aggressive daytrading on altcoins, this is probably the best market to act in. The volumes have been going through the roof on PERP, through which it's quite easy to digest several trading strategies during such an upwards run.

1 - Breakout plays on the upside (marked in green). If a breakout takes place after a period of consolidation, usually you'll be seeing a move of 10-20% to the upside and then a correction. In the past four days, we've been seeing six cases of this.

2 - Support/resistance flip plays. After the breakout, usually a retest occurs before price starts to continue moving. I'm always favouring these type of plays and that's what you can see in the chart too, through which a total of around ten trades could be digested in the timespan of a few days.

Additionally, if the price starts to make a new lower low here, we can assume that a reversal is on the horizon. Reclaim of $1.12 is a must-watch. If that doesn't happen, shorts are activated towards the lower boundaries at $0.90.